Making the most of annual leave under furlough
The government guidance confirms that employees can be required to take annual leave while furloughed. There are no explicit restrictions on the amount of leave. Read on and click through if you’d like to know the financial savings your business should be making. We can do this for you for free.
Savings available are significant
Take a worker paid £500 per week. If there are, say, 9 further weeks during which a worker is not required to work but is furloughed, the worker could be given 6 weeks’ notice to take 3 weeks of holiday their annual entitlement.
The cost to the employer of that holiday would normally be £1,500. However, that can be subsidised by furlough payments which, to keep the sums simple, we will assume to continue at 80%.
That means the employer saves £1,200. If you add national insurance and pension contributions, it is closer to £1,350 for just one employee.
Let’s say more commonly the holiday to be required is 2 weeks. At 37.5 hours per week on minimum wage level of £8.70, an annual salary of £16,995, the saving is £572 for each employee. On salaries of £30,000 or higher, the saving is still about £1,301 per employee.
How far can you go?
From various perspectives it may be objectionable to insist a worker takes 3 or even 4 weeks holiday all at once. But where businesses would normally expect a significant portion of annual leave to be taken in the summer months, if that just happens to coincide with availability of furlough payments why shouldn’t an employer insist on annual leave of, say 2 weeks, being taken as normal? For any full time worker, that is still broadly a saving of between £600 and £1,350 and which avoids the later disruption from stored up holidays.
It is possible to envisage circumstances where an employer might even require 4 weeks leave to be taken if business survival was in the balance. The effective saving via furlough could be such that, following survival, the employer could at later stage exercise discretion to allow more leave to be taken, whether paid at full rate, reduced rate (say 80%) or even unpaid.
Should you do this?
It could be argued there is a civic duty to do so. For a short article on holidays in the wider context of the furlough scheme, you can read here.
No reason not to
The furlough scheme is being kept under review in relation to holidays. Even if the scheme is changed to restrict holidays being paid for by furlough or even seek reclaim those payments, the holiday will still have been taken. The employer will have credit for paying the holiday and be no worse off in cash terms than if the holiday were taken at a later date. There will, however, have been a cash-flow benefit, potentially helping to save jobs.
Of greater concern, many workers will want to store up holidays and holiday pay until after furlough, so maintaining goodwill while communicating this requirement is important.
Additionally, there is also potential for imposition of holidays to give rise to discrimination complaints in some circumstances.
Both of these issues can be addressed easily and effectively as long as individual circumstances are considered and notices are properly drafted and communicated.
For more details of how to achieve this, click here.
govt guidance: holiday entitlement and pay during coronavirus covid-19
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Jackson Osborne accepts no responsibility for the content of any third party website to which this webpage refers.